Millions of people each day accept or click “OK” to terms of use on websites and internet facilities. Terms of use (aka terms of service) regulate legal relationships, particularly contractual dealings between users and site owners.

Terms of use are useful because most online intellectual property (IP) and general business law issues can be partially or fully treated or neutralised with comprehensive, customised and site-specific provisions. This is apparent from common law (ie court decisions in Australia and elsewhere), and our day to day practice as specialists in IP, internet law, IT and e-business law.

"terms_of_use"Terms of use (aka terms of service) are legal terms and conditions which a website owner specifies and typically treats as having the status of being legally binding under contract law. Courts accept them.

When they are for software as a service arrangements they are sometimes known as click-wrap agreements, due to the pre-history that exists for shrink-wrap agreements. When software was commonly sold in boxes, a written agreement came in the box and the practice developed that breaking the shrink wrap was treated as acceptance of the licensing terms and conditions.

Terms of use are used for websites, Web 2.0 sites using social media facilities, peer-to-peer services, software as a service businesses, and numerous other types of online or IT offerings.

There are benefits to beginning risk minimisation for your online presence by focusing initially on website terms of use.

Preparing the terms helps think through, conceptualise and document the operation of the site, area by area, section by section or even page by page.

This helps build practical risk minimisation customised around the information architecture or process governing or controlling the user experience.

There’s a real benefit to building practical risk minimisation. It helps make reliance on the legal wall of the terms of use more of a fallback position. It also helps dealing with customer complaints. It saves money by reducing reliance by front line staff on generally ineffective customer relationship management statements such as “I can’t help you, it’s our policy to… only do X“.

Good terms of use will generally reflect the internet venture’s business model with an architecture of legal words matching as best as possible the site’s operations to make the terms clear to general readers, as well as legal assessors (eg lawyers or judges) who might attack or drill down if and when alleged problems arise.

In short, good terms of use are clear to readers with various levels of understanding.

Terms of use typically treat a myriad of legal considerations including:

  • Definition of who are the parties to the terms of use
  • Contract formation (if appropriate) between the operator and the user
  • Intellectual property ownership, control and amendment of content – all of which is important for both website and user generated content
  • Consent to use of cookies and personal data
  • Liability limitation and exclusion for the operator
  • Warranties and indemnity, if any, given by the operator
  • Acceptable use rules to apply to all user generated content
  • Account suspension, termination and consequences of termination
  • Governing law and other general or “boiler plate” clauses

Legal risk to the operator of a website can also be further minimised with other measures and mechanisms, eg appropriate business and enterprise structuring, but those steps are beyond the scope of this short article.

Proper business operations, eg in accordance with documented processes and procedures, is a key way to take practical risk minimisation steps which means that as a consequence related legal risks are also minimised. In essence this is what terms of use help achieve for many owners of internet ventures.

Noric Dilanchian